How UX impacts a company’s financial performance [study]

UX investments earn a huge return

Charlie Claxton is chief creative strategist for UpTop, a full-service, web-based software application design firm that focuses on user experience design, conversion and mobile. He has led successful design efforts for Expedia, Amazon and Microsoft as well as growing early-stage companies and is a frequent speaker on user experience (UX) design and conversion.

Claxton recently shared with us data revealing that every $1 invested in UX yields a $2 to $100 return, a stunning statistic that makes one pause and consider their own brand’s UX. But now that you know that, how do you get your boss (or even yourself) to pull the trigger on that investment? In his own words below, Claxton offers an entire case study:

Looking for ammo to back up that investment in UX design?

Then take a moment with the story of the UX Fund, a year-long experiment in 2006 that inevitably comes up when the UX crowd talks about the value and importance of great user experience design.

The premise behind the UX Fund experiment is simple: companies that deliver a great user experience will see it reflected in their stock price.

Two UX designers, Geoff Teehan and Jon Lax, tracked 10 companies in their UX Fund and invested $50,000 in the fund. The companies, which included Apple, Target, Electronic Arts, Research in Motion (RIM), Progressive Insurance and JetBlue Airways, among others, shared some of the following attributes:

A demonstrated care in the design of their products and Web site.

A history of innovation and inspiring loyalty in their customer base.

A track record of customers having positive experiences to do business with them.

After a year, Teehan and Lax found that the fund grew 39.3 percent growth, beating out all of the major indices. Of course, it’s not a straightforward numbers game, and Teehan and Lax acknowledged that a number of underlying factors – some in their favor, some not – affected the final outcome.

Result: UX actually impacts stocks

“It’s clear that the fund did well from a performance perspective, beating out all of the major indices,” they wrote the experiment’s summary. “However, that wasn’t the case during the entire hold. Up until September there was usually one index that was outperforming it. On two occasions the fund was actually in the red. It wasn’t [outperforming] until financial news or new product announcements from holdings like Apple, Google and RIM boosted its overall value nearly 30 percent in less than two months.

“Even though the impact that UX has on a company’s stock price is but one of many factors, we feel confident that (UX) was a major contributor to the fund’s success.” (Click here to read the entire post and see the UX fund graphs.) http://www.teehanlax.com/blog/ux-fund-matures-up-393/

So nearly a decade later, why does that matter?

In today’s world, UX firms talk a lot about delivering measurable payoffs that come with providing a seamless and attractive user experience. In other words, people who come to your site or use your app will find it attractive and easy/ pleasant to use. That’s good touchy-feely stuff, but what better payoff could a company ask for than increased revenues and improved bottom line?

Critics easily dismiss the UX Fund experiment, arguing that these companies’ inherent strengths influenced the fund’s results more heavily than UX design. But without great UX design, a company can’t provide a stellar customer experience and a poor customer experience definitely impacts financial performance.

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